Wholesale Inventories Looking Heavy Relative To Sales

Wholesalers had been keeping their inventories down as sales have slowed but they got behind in January. Inventories rose 0.3 percent in the month which isn't alarming in itself but relative to sales, which fell 1.3 percent, inventories look heavy. The stock-to-sales ratio rose two notches to 1.35 from 1.33 for the highest reading of the recovery, since April 2009.

Industries where inventories rose relative to sales include furniture, farm products, computers, and autos. Very few industries at the wholesale level show leaner levels in the month.

Year-on-year, wholesale inventories are up 2.0 percent against a 3.1 percent decline for sales. Increases for inventories are a positive for GDP calculations but not for the production or employment outlooks nor for business confidence. Heavy inventories were a question during the fourth quarter and may be becoming one for the first quarter as well.

Recent History Of This Indicator:
Wholesale inventories, due to soft demand, fell each month of the fourth quarter and the reading on the first month of the first quarter is also negative, at a consensus minus 0.1 percent. Wholesale inventory liquidation has been a success, keeping the stock-to-sales ratio for this sector at a moderate 1.32 in both December and November.